Parent Company Acquired 90% of Son Inc

question 34

Essay

Parent Company acquired 90% of Son Inc.on January 31,20X2 in exchange for cash.The book value of Son's individual assets and liabilities approximated their acquisition-date fair values.On the date of acquisition,Son reported the following:
During the year Son Inc.reported $310,000 in net income and declared $15,000 in dividends.Parent Company reported $520,000 in net income and declared $25,000 in dividends.Parent accounts for their investment using the equity method.
Required:
1)What journal entry will Parent make on the date of acquisition to record the investment in Son Inc?
2)If Parent were to prepare a consolidated balance sheet on the acquisition date (January 31,20X2),what is the basic elimination entry Parent would use in the consolidation worksheet?
3)What is Parent's balance in "Investment in Son Inc." prior to consolidation on December 31,20X2?
4)What is the basic elimination entry Parent would use in the consolidation worksheet on December 31,20X2?

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Definitions:

Monopoly Output

The quantity of goods or services produced by a monopoly, which is determined at the point where the monopoly's marginal cost meets the market demand curve.

Duopolist

One of two firms in a market where only two firms offer a particular product or service, leading to a specific form of competition.

Cartel Agreement

An arrangement among competing firms to control prices or exclude entry of a new competitor in the market, often through setting production levels or dividing markets.

Nash Equilibrium

A concept in game theory where no player can benefit by unilaterally changing their strategy if the strategies of the others remain unchanged.